Shares of GreenSky, Inc. (NASDAQ: GSKY) are up about 14% as of 11 a.m. EDT on news that it is partnering with American Express (NYSE: AXP). A press release suggests that the lending platform will be able to market its service to merchants who use the American Express network, helping GreenSky corral more merchants and drive loan volume.
GreenSky helps small businesses offer financing solutions to their customers. For example, a roofing company might use the platform to offer low-interest loans to its customers to drive sales.
GreenSky makes its money in the form of fees, which it collects for acting as the middleman between the loan applicant and the bank, and for servicing the loan thereafter. Regional banks do the heavy lifting by funding the loans.
Image source: GreenSky Inc.
A partnership between the loan platform and American Express could help GreenSky add many more merchants to its service seemingly overnight. Relevant details from the press release are quoted below.
The multi-faceted collaboration will enable eligible U.S. merchants within the American Express network and the customers they serve to access GreenSky's proprietary point-of-sale financing solutions. Using GreenSky's platform and technology, home improvement and elective healthcare merchants that accept American Express will be able to drive incremental sales by providing qualifying customers with options to finance large purchases in a paperless environment.
In addition, the companies plan to pilot a digital direct loan option with a platform for eligible American Express consumer Card Members to search for participating merchants within GreenSky's network, and to finance their purchases at participating American Express accepting merchants of their choosing within or outside of GreenSky's merchant network. The direct to consumer loans would initially be offered in the home improvement category in five U.S. cities.
GreenSky's primary limit to growth is how many merchants use its platform, and the average amount of volume each merchant sends over its platform. Considering that GreenSky had just 12,000 active merchants at the end of March, this new partnership could help the company rapidly increase the number of merchants who use the service.
Financial details are sparse. The press release said nothing about the terms of the deal, such as how origination fees might be split between the loan platform and the credit card issuer, or whether American Express would fund some or all of the loans generated through the partnership.
Shareholders won't have to wait long for additional detail, though. GreenSky is slated to report earnings before the market opens on Tuesday, and one would expect that this partnership will take center stage in the conference call that follows.
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